In August 2013 National announced the payment to Rio Tinto of $30 million to persuade the multi national corporation to continue with its contract to purchase electricity from Meridian Energy. Many thought at the time that the payment was cynical manipulation by Rio Tinto of the Government at a time where the cancellation of the electricity supply contract would have played havoc with the Government’s asset sale programme.
The payment may have saved 800 jobs for a couple of years. But Rio Tinto are now engaged in what looks like further brinkmanship and I expect the intention is to obtains more corporate welfare.
From Radio New Zealand yesterday:
New Zealand Aluminium Smelters had the option to end its power contract with Meridian Energy from today, but both sides have now agreed to delay any decision until 3 August.
As part of the $30 million government grant it received to stay open two years ago, New Zealand Aluminium Smelters was given until today to decide on its future – and that of the 800 people it employs.
Meridian’s chief executive Mark Binns said the smelter’s owner had been in talks with electricity companies, including Meridian, about its power needs, and wanted more time to consider its options.
“Although we are some way away from any sort of deal we think there are elements that are worthy of further discussion and we’d like to think it was possible that a deal could be put together inside that time frame if it was worthy of our investing more time in the whole matter.”
This post from two years ago by James Henderson makes a persuasive case for the Government to have said no. If Tiwai’s power was no longer required then the most expensive electricity generation could be mothballed and prices would come down dramatically. This may hurt shareholders of the power companies but that is the nature of a market.
And how is Tiwai Point performing lately? Not bad according to Rio Tinto’s last annual report.
The Tiwai Point smelter in New Zealand, also part of the Pacific Aluminium cash-generating unit, is currently profitable as a result of high regional and product premiums and operational cost improvements; however, operational uncertainties indicate that the impairment losses previously recognised are yet to reverse.
Andrew Little’s comments on the issue is spot on.
It’s not good enough that after two years of negotiation between Meridian Energy and Rio Tinto there is now another delay until August.
The 800 workers at Tiwai deserve better as this whole mess has been created by the Government’s inept negotiations in 2013.
They used taxpayers money to bolster Meridian Energy which was about to be sold off as part of the Government’s asset sales programme.
We must never allow the events of 2013 to happen again. That brazen exercise in corporate welfare saw Rio Tinto get $30 million, its notice period halved and cheaper electricity.
Tiwai Point is just another example of the Government’s terrible negotiating skills. We have seen it again and again with SkyCity, Warner Brothers and the State Housing sell off.
Of course current circumstances are different and the Government is presumably less inclined to make any payment. But you have to question the decision two years ago to pay the $30 million to Tiwai Point. The extra couple of years bought appear to be well and truly gold (or is that aluminium) plated.